AAS can advise if borrowing to invest would be a useful strategy to assist the growth of your investment portfolio and accumulate wealth. This strategy lets the appropriate investor borrow money to take advantage of the long-term growth potential of investments.
Borrowing Strategies are not without risks, and investors need to understand the potential negative impacts and risks involved.
A borrowing to invest strategy allows you to invest a larger sum of money at one time rather than making smaller contributions over an extended period of time. Therefore allowing the investments more time to grow over the investment period, taking advantage of the potential long-term compounding returns.
This strategy can also provide tax-savings benefits, as the interest you pay on a loan used to purchase investment funds may be tax deductible.
When considering a Borrowing Strategy, it's important to have sufficient available cash flow to cover regular interest payments and the changing interest rates based on varying market conditions. Bearing in mind that the cash flow for the interest payments does not normally come from investment income from the investment for which you borrowed — hence you need ensure you are capable of paying loan interest from other funds such as employment income or other investment income.
Your AAS advisor will explain the risks and benefits of borrowing to invest and help you determine if this strategy is right for you.